Form 20-F 2005

This discussion is intended only as a descriptive summary. It does not address all aspects of French tax laws that may be relevant
to you in light of your particular circumstances. It is based on the applicable laws, conventions and treaties in force as of the date
of this Annual Report, all of which are subject to change, possibly with retroactive effect, or to different interpretations. If you are
considering buying our shares, you should consult your own tax advisor about the potential tax effects of owning or disposing of
shares in your particular situation.
Taxation on sale or disposal of shares
Generally, you will not be subject to any French income tax or capital gains tax when you sell or dispose of our shares if the following
apply to you:
you are not a French resident for French tax purposes; and
you have held, either directly or indirectly, alone or with relatives, not more than 25% of our dividend rights, known as droits
aux bénéfices sociaux, at any time during the preceding five years.
If a double tax treaty between France and your country contains more favorable provisions, you may not be subject to any French
income tax or capital gains tax when you sell or dispose of any of our shares.
If you transfer shares using a written agreement, that agreement must generally be registered. You will be required to pay a registration
duty of 1% (1.1% from 2006 on) of either the purchase price or the market value of the shares transferred, whichever is higher. The
maximum duty is €3.049 per transfer (€4,000 from 2006 on). However, in some circumstances, if the agreement is executed outside
France, you will not be required to pay this duty.
Taxation of dividends
In France, companies may only pay dividends out of income remaining after tax has been paid.
French Withholding Tax
Under French domestic law, dividends paid to shareholders who are not residents in France are normally subject to a 25%. Under
most tax treaties entered into between France and other countries, the rate of this withholding tax may be reduced in specific
circumstances. The shareholder can generally subsequently be entitled to a tax credit in his or her country of residence for the
amount of tax actually withheld. Under some tax treaties, the withholding tax is eliminated altogether.
French Tax Credit
A tax credit known as the avoir fiscal was previously attached to certain distributions from French companies. Such avoir fiscal
was, subject to certain conditions, transferred to certain non-French tax residents receiving dividends from a French company.
The French Budget Law abolished this tax credit for 2004.
With respect to dividends paid as of January 1, 2005, French individual shareholders are now entitled, to a new tax credit equal to
50% of the dividend paid, capped, per year, at €230 or, as the case may be, €115, depending on the marital status of the individual
shareholder. Non-individual shareholders are not entitled to this newly implemented tax credit.
Under French law, non-residents are not eligible for the benefit of the French tax credits (including from 2005 on,
the new tax credit).
However, certain tax treaties provided for a refund of the avoir fiscal or similar tax credit to certain non-residents. Due to these tax
treaties, individual shareholders that are residents of countries that have signed the above-mentioned treaties may be entitled to
a refund of the new tax credit replacing the avoir fiscal.
Form 20 - F 2005 - Rhodia
103